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AccountingPlay.com
Accounting Cheat Sheet
Apps | Downloads | Books
by John Gillingham, CPA All Rights Reserved
Accounting
Cheat Sheet
by John Gillingham, CPA All Rights Reserved
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AccountingPlay.com
Accounting Cheat Sheet
Apps | Downloads | Books
by John Gillingham, CPA All Rights Reserved
DIAGRAM OF T-ACCOUNTS METHODS & ORGS
Balance Sheet as of 12/31/2100 Accrual basis Follows the matching principle and recognizes
Assets = Liabilit esi + Equity transactions as they occur (GAAP Method)
Cash basis Recognizes transactions when cash or equivalents
= + have been exchanged (Not GAAP)
US-GAAP Generally Accepted Accounting Principles system
Income Statement, year ended 12/31/2100 ded established by FASB that governs financial reporting
or arnings
T-Account Revenue - Expense ec IFRS International Financial Reporting Standards Financial
ained E reporting standard adopted widely outside of US
t (No LIFO permitted, different FMV valuation permitted)
Debit Credit - ofit or loss re
o R
Pr t
= Net income increases RE
ACCOUNTING EQUATION INVENTORY
Equation Journal Entry debit credit Valuation at lower of cost or market
Assets = Liabilities + Equity Cash 100 Higher ending inventory = Lower Cost of Goods Sold
Equity = Assets - Liabilities Common stock 100 Lower Cost of Goods Sold = Higher Net Income
Receive cash for common stock
Cost of Goods Sold (COGS) FIFO First In First Out
Beginning inventory Gross Profit Revenue x Early purchases come out of inventory first
+ Purchases Revenue (1 - Gross profit
Ending inventory rate) LIFO Last In First Out
- COGS
Cost of Goods Sold (COGS) Gross Profit COGS Early purchases tend to stay in inventory
Average cost Total cost / Quantity = Cost per unit
DEBITS & CREDITS
Increases & Decreases Increase Decrease Perpetual inventory tracked in real time
Bolded: Natural balance
Periodic inventory tracked by counting at end of period
Balance Sheet
Asset debit credit Net Income Comparison
Contra asset credit debit Price FIFO LIFO Average
Contra assets: Accumulated depreciation, Rising Higher Lower Middle
Allowance for doubtful accounts Falling Lower Higher Middle
Liability credit debit Rule: In a period of increasing inventory costs, FIFO
method results in higher net income compared to LIFO
Equity credit debit
Contra equity debit credit
Contra equity: Treasury stock Cost of Goods Sold Comparison
Price FIFO LIFO Average
Income Statement Rising Lower Higher Middle
Revenue credit debit Falling Higher Lower Middle
Most transactions: Typically credits
Expense debit credit
Most transactions: Typically debits
AccountingPlay.com
Accounting Cheat Sheet
Apps | Downloads | Books
by John Gillingham, CPA All Rights Reserved
PRINCIPLES, GUIDELINES, ASSUMPTIONS
Comparability Financial statements must be comparable period to period
Conservatism Considers all risks | strict rules
Consistency Same accounting methods year to year
Constraints Information has a cost/benefit and is material
Cost principle Keep costs at purchase price or lower (lower of cost or market)
Economic entity Maintain separate records for each entity
Full disclosure Provides detailed information in addition to financial statements
Going concern Assume business is going to and has capability to continue
Matching Recognize cost the same time as benefit
Materiality Significance to the overall financial picture
Monetary unit Currency is used to record transactions and is assumed to be constant
Relevance Financial reporting has predictive, feedback, and timeliness value
Reliability Financial reporting is neutral, valid, and verifiable
Revenue recognition Conditions of how an organization records revenue
Time period Report financial activity in specific time periods
TEST VOCABULARY
Cost basis Original cost of investment minus prior accumulated depreciation
Disposition Sale, scrapping, or removal of an item, typically an asset
Gross | Net Gross = total number | Net = gross number minus expenses
Goodwill Purchase price less tangible value of physical assets purchased
Net asset value Cost basis minus accumulated depreciation (prior total depreciation)
NSF Non-sufficient funds, typically a returned check
Principal The amount, typically of a loan
Unrealized gain | loss Investment that has increased | decreased in value, but not yet sold
Unrealized calculation Basis minus fair market value (FMV)
INTEREST FORMULAS BUSINESS TYPES
Monthly interest P X (r / 12) Sole Proprietorship One owner, no liability protection
Compound interest A = P(1 + (r/n))^nt Partnership Two or more owners, no liability protection
Limited Partnership Two or more owners, liability protection
A = Amount, P = Principal, r = Rate LLC Limited Liability Company Liability protection, flexible
n = compoundings per period, t = number of periods Corporation Liability protection, double taxation issues
BANK RECONCILIATION
Balance per bank
+ Deposits in tr ansit
- Outstanding checks
+/- Errors, fees, returned items
Balance per books
AccountingPlay.com
Accounting Cheat Sheet
Apps | Downloads | Books
by John Gillingham, CPA All Rights Reserved
TECHNICAL INVENTORY AND COSTING
FOB shipping point Buyer’s books at year end, title passes when goods delivered
FOB destination Seller’s books at year end, title passes when goods received
Raw materials Direct costs of materials manufactured such as steel
Overhead costs Costs typically thought of as expenses that are added to cost of goods
Work in process (WIP) Goods in the process of being manufactured (assets)
ASSET SALES
Sale of inventory Increase AR, Increase sales, Decrease inventory, Increase cost of goods sold
Debits and credits Debit AR, Credit sales, Credit inventory, Debit cost of goods sold
Sell appreciated stock Increase cash, Increase realized gain, Decrease stock
Debits and credits Debit cash, Credit realized gain, Credit stock
Sell stock for a loss Increase cash, Increase realized loss, Decrease stock
Debits and credits Debit cash, Debit realized loss, Credit stock
Sell depreciated asset, gain Increase cash, Decrease asset, Decrease accumulated depreciation, Increase gain
Debits and credits Debit cash, Credit asset, Debit accumulated depreciation, Credit gain on sale
Sell depreciated asset, loss Increase cash, Decrease asset, Decrease accumulated depreciation, Increase loss
Debits and credits Debit cash, Credit asset, Debit accumulated depreciation, Debit loss on sale
BONDS
Bonds Financial instrument (agreement) issued by a company to borrow money from investors at a specified term (time) and rate
Issuer Company that is raising the money
Face value Amount that is repaid at the end of term
Stated coupon rate Interest that bond pays investor
Effective interest Rate of interest investor receives if the bond is purchased at a discount or premium
Premium Amount company is paid in excess of face value, often paid when coupon rate is greater than market rate
Premium = Price paid for bond - face value
Discount Amount below the face value paid for a bond often occurs when coupon rate is less than market rate
Discount = Face value - price paid for bond
Depreciation terms Depreciation methods
Cost Price paid for asset (may include costs to Straight line Rate = (Cost - Salvage value / Useful life)
install)
Book value Cost - Accumulated depreciation Declining Book value x Depreciation rate
Salvage value Estimated scrap value at the end of asset (Accelerated method) Rate = Straight line rate x Applicable %
life
Accelerated methods Methods resulting in greater depreciation Applicable % = 150% for 150 DB and
during earlier years 200% for double declining
MACRS / ACRS / DDB Accelerated depreciation methods
Depreciation Expense taken on a physical asset over time Sum-of-years’-digits (Cost - Salvage value) X Applicable
Amortization Expense taken on an intangible asset over fraction
time (Accelerated method) Applicable fraction = Years of estimated
life remaining / Sum of years digits
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